Business Directories

Most Mideast rich 'trust their kin with wealth'

Dubai, November 14, 2011

An overwhelming majority of Middle East high net worth individuals (HNWIs) trust the next generation to protect their inheritance, says a study.

However, 35 per cent of global high net worth individuals do not trust their children or stepchildren to protect their inheritance, says the report in the Barclays Wealth Insights series.

The report, The Transfer of Trust: Wealth and Succession in a Changing World, launched today is based on a global survey of more than 2,000 high net worth individuals. It provides an in-depth examination of wealthy individuals’ attitudes towards wealth transfer and succession planning, as well as offering insight into what the future holds for the next generation. Interestingly, it also looks at how wealth in many cases can act as a double-edged sword, leading to distrust and conflict.

Globally, developed countries display higher levels of uncertainty when it comes to trusting their children and stepchildren to look after their wealth. Respondents in the Middle East (78 per cent), Africa (77 per cent) and Latin America (75 per cent) show high levels of trust in their children and stepchildren when it comes to money management and protecting their inheritance, when compared to Australia (59 per cent), North America (61 per cent) and Europe (62 per ent).

Of all those surveyed, 29 per cent of global wealthy believe that inheritance places an “unnecessary burden” on the next generation, with respondents in India (50 per cent), Latin America (44 per cent) and Hong Kong (38 per cent) showing the highest levels of agreement with this. Thirty five per cent of respondents in the UK and the same number again in Ireland also share this view, bringing to life the concerns parents have when it comes to wealth and succession.

Rory Gilbert, managing director and head of Middle East and North Africa for International Private Banking at Barclays Wealth, said: “This report provides an in-depth study into the attitudes of high net worth individuals towards succession planning. Regionally, 90 per cent of Middle East respondents place a high priority on setting up a trust fund for their children to secure their future. However, when it comes to seeking professional advice in developing an inheritance plan for their offspring, respondents are evenly split on their views.

“Understanding options for succession planning in advance, and seeking professional advice can provide confidence that your wealth will be wisely managed in the future.”

Globally, parents want to pass on their material wealth to their children, as well as a roadmap for a happy life, but the report reveals some interesting paradoxes about inheritance and succession.

Source of wealth is seen as a key determinant of financial happiness, with earned wealth much more likely to result in happiness than inherited wealth. However, wealthy respondents remain committed to passing on their wealth, with 96 per cent of global respondents intending to do so.

However, an unfortunate drawback of wealth is its ability to cause conflict – and in the context of succession – family conflict. The report reveals that 40 per cent of global wealthy have had direct experience of family wealth leading to disputes. This figure was highest amongst respondents in India, with 61 per cent of those surveyed stating that they have encountered family conflict due to wealth – a sentiment echoed by respondents in Singapore (53 per cent), Hong Kong (51 per cent) and Monaco (51 per cent). Conversely only 11 per cent of respondents in Qatar said that they have experienced family tensions as a result of wealth.

Despite all the potential conflicts associated with succession and wealth, the report shows that the world’s wealthy remain committed to passing on their assets to the next generation, with only four per cent of global respondents believing that this should not be the case.

The report say the top five challenges for the future are: Economic turbulence/inflation/rising taxation (56 per cent); Caring for ageing populations (52 per cent); Employment opportunities (51 per cent); Climate change/environmental issues (38 per cent); and Rising education costs (22 per cent)

When it comes to the skills that the next generation need to equip themselves with in order to be successful in life, global respondents advocate technical subjects, such as IT/Technology (68 per cent), Science (59 per cent) and Maths (54 per cent), rather than Humanities and the Arts. – TradeArabia News Service